It looks like someone linked you here to our printer friendly page.
Please make sure you go Back to Safehaven.com
for more great articles just like this one!

ECB and Dow Theory Undermine Bulls

By: Chris Ciovacco | Thursday, December 8, 2011

This morning's activity in the S&P 500 futures underscores what the market
cares about. The market is not focused on employment (better than expected
this morning), earnings (good), or valuations (respectable). The market cares
about one thing - money printing; specifically, having the ECB print money
to buy Italian and Spanish bonds.

During a press conference this morning, the head of the ECB disappointed markets
by clarifying previous remarks relative to the "sequencing" in Europe. The
market thought the ECB was ready to step up their bond buying activity if leaders
moved closer to a European fiscal union. According to the Wall Street Journal's Market
Beat:

In response to a question during his press conference, Draghi just denied
signaling that the ECB would embark on extra sovereign-debt purchases last
week, which has taken stock futures by surprise. This is disappointing
those who were hoping for some promise that the ECB would back up the money
truck and buy all the sovereign debt lying around, if only the EU would
agree on a tighter union and jump through some other invisible hoops. That's
not happening.

Draghi also said the ECB didn't consider a bigger rate cut than the rather
thin 25-basis-point cut it delivered this morning and that even that decision
was not unanimous -- signaling there are plenty of hawks on the ECB who
aren't in a hurry to back up that money truck.

Piling on the disappointing comments, Draghi also poured cold water on
the idea of the ECB lending to the IMF to lend to European governments,
or whatever the goofy shell game idea du jour was.

S&P futures dropped roughly 20 points after the ECB President's remarks.
It's all about money printing - all the time in this debt-saddled world we
live in. You may not like it (we don't), but it is what it is. This morning's
developments change the short-term outlook considerably. Unless the market
gets something positive from the ECB in the coming days, the S&P 500 may
continue to struggle near its 200-day moving average.

The problems in Europe remain very serious. Stocks and commodities, especially
over the next three months, remain vulnerable to significant downside. The
NASDAQ (QQQ) has continued to lag the S&P 500 (SPY), which sends a concerning
signal for both markets. On Wednesday, the S&P 500 stalled again just
below the downward-sloping 200-day moving average.

While we remain open to another
push higher, numerous longer-term bearish signals remain, including a
Dow Theory sell signal. In the video below, originally released on November
30, we explore the question "How Long Do Bear Markets Last?" using 112 years
of market data. We remain on a Dow Theory sell signal, a signal that has
an excellent track record of forecasting ongoing problems for stocks.

The bulls still control the intermediate-term trend. The bears still control
the long-term trend. Therefore, investors should remain cautious and skeptical
of any money-printing induced rallies in the days and weeks ahead.

Chris Ciovacco is the Chief Investment Officer for Ciovacco
Capital Management, LLC. More on the web at www.ciovaccocapital.com.

All material presented herein is believed to be reliable
but we cannot attest to its accuracy. Investment recommendations may change
and readers are urged to check with their investment counselors and tax advisors
before making any investment decisions. Opinions expressed in these reports
may change without prior notice. This memorandum is based on information available
to the public. No representation is made that it is accurate or complete. This
memorandum is not an offer to buy or sell or a solicitation of an offer to
buy or sell the securities mentioned. The investments discussed or recommended
in this report may be unsuitable for investors depending on their specific
investment objectives and financial position. Past performance is not necessarily
a guide to future performance. The price or value of the investments to which
this report relates, either directly or indirectly, may fall or rise against
the interest of investors. All prices and yields contained in this report are
subject to change without notice. This information is based on hypothetical
assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES,
EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM
ANY INFORMATION CONTAINED IN THIS ARTICLE.

Ciovacco Capital Management, LLC is an independent money
management firm based in Atlanta, Georgia. CCM helps individual investors and
businesses, large & small; achieve improved investment results via research
and globally diversified investment portfolios. Since we are a fee-based firm,
our only objective is to help you protect and grow your assets. Our long-term,
theme-oriented, buy-and-hold approach allows for portfolio rebalancing from
time to time to adjust to new opportunities or changing market conditions.